What could be more pleasant than thumbing your nose at the rest of the world as it shrinks from sight through an aircraft porthole? With umpteen hours of travel ahead and cocooned in space with an exquisite dry white, you could read your visitors insurance brochure and reassure yourself that all is well. Or you could enjoy yourself instead.

Reading travel insurance is best saved for a day that is horrid to start with. Once you get past the pictures of Big Ben and the Statue of Liberty, there’s a black hole full of fine print.

You are better off buying a policy you can easily read and understand than one which is crammed with gobbledegook. Besides, when you buy a policy you sign a declaration saying you have read it and understood its contents. So take a handful of brochures home with you and take your time.

But it is vital you buy your travel insurance before you pay for your ticket and travel arrangements, otherwise you will not be covered against loss of deposit and cancellation charges if you have to cancel due to unforeseen circumstances.

Premiums and benefits generally depend on your choice of destination. To get adequate cover for travel to the US or Japan, for example, you generally need the maximum level of cover.

This is because medical expenses are very high in these countries and anything short of unlimited medical cover is a risk. So benefits (and therefore premiums) are highest for those regions.

Most insurers offer three levels of cover, although some carve the world into four geographic regions while others offer just two levels of cover.

Travel insurance offers a core of basic benefits including: emergency medical and dental care; refund of deposit and cancellation charges; additional travel and accommodation expenses; loss of baggage; accidental injury or death; personal liability, and hijacking.

Some insurers add extras such as: free cover for dependent children travelling with single parents or grandparents; loss of income benefit if you are injured on holiday and unable to work on your return; and resumption of journey - this is a benefit towards the cost of returning overseas if your holiday is disrupted because of a relative’s death or illness.

But there are exclusions and conditions attached, so claiming for any of these events is not all plain sailing. Getting compensation for something as simple as loss of baggage can turn into a nightmare, as the story below illustrates.

Most complaints heard by the panel are for claims rejected by insurance companies for stolen and lost baggage, usually on the grounds that the insured did not take reasonable precautions to protect possessions, or left them unattended in a public place.

Here’s a typical example. A man was travelling to Los Angeles and, due to the riots in that city, his flight was diverted and arrived in San Francisco at 11 pm, where a curfew was in force. He had no option but to spend the night at the airport.

He collected his luggage and placed it under a couch-type seat. When he awoke five hours later his money belt had been cut from his waist and his luggage was gone.

He reported his loss to the airport police. The insurance company rejected the claim on the grounds that the luggage and/or personal effects had been left unattended and that he had failed to take all reasonable care of them.

The panel upheld the company’s decision - at least for the luggage. Had the insured fallen asleep while guarding the luggage the result may have been different. But the insured took a positive decision to settle down and go to sleep, leaving his luggage unattended. The airport had a storage facility and his failure to use it amounted to a failure to take reasonable care.

But the panel ordered the company to compensate the man for the loss of$US350 in stolen cash as he was not regarded as having failed the test of reasonable care for keeping his money on him.

Pre-existing illness is another area which gives rise to many disputes. If you do not disclose an existing ailment to your insurer, you may well have any medical and dental claims knocked back.

“Pre-existing” is defined variously by insurers, with some taking a harsher view than others. It is usually defined as a known illness - either recurrent or one for which you have consulted a doctor for up to 90 days previously(pregnancy is treated as a pre-existing condition).

Insurers will generally cover pre-existing conditions for an additional premium once you have produced a doctor’s certificate showing you are fit to travel.

Most policies cover medical evacuations, but it is not enough for you to feel more comfortable being treated by a familiar person in Australia than the local doctor or hospital in your host country. The circumstances under which repatriation is carried out are limited by the terms of the policy, which are very tight and require the agreement of the insurer.

Similarly, while cancellation and additional expenses provisions offer peace of mind for emergency situations, such as a family member falling seriously ill or dying in Australia, there are exclusions that make such claims difficult to qualify for.

If the relative had a preexisting condition, for instance, it is likely you will not be compensated.

Another area to watch is high-risk sporting activities. While some insurers exclude these outright (or through waivers buried in the fine print), others are prepared to cover them. For instance, HCF will cover, at no extra cost, amateur snow skiing, water skiing, paragliding, parachuting and scuba diving, if you have an appropriate certificate. Cover-More will cover bungy jumping, ballooning, abseiling, parasailing, parachuting, paragliding and gliding at an additional premium.

Senior citizens are sometimes charged a loading. HCF charges 50 per cent more for travellers aged 70 to 74, and 100 per cent more for travellers over 74. Qantas, on the other hand, does not charge an extra premium if you arrange your trip through a Qantas Travel Centre, or you have a ticketed reservation on Qantas during the period of your cover. Some insurers will also ask for a certificate of good health from your doctor.

As was shown by Money’s survey of credit cards, some cards also offer free travel insurance. However, this is usually limited to accident insurance, with payouts ranging from $100,000 to $500,000, and so will meet only part of the needs of most travellers.

In today’s society, you should have liability insurance to protect yourself against lawsuits. Homeowners and other real-estate owners buy insurance to protect against injuries on their property; auto business owners buy garage keepers liability insurance for protection against auto accidents; doctors, lawyers and other professionals need insurance to protect against malpractice claims.

While liability insurance is necessary to protect your life savings against lawsuits, it may not be sufficient. The insurance company that you expected to cover you against liability claims may disappear, exposing your personal savings to seizure.

A majority of firms with 1,000 employees or more are ready to contract product liability insurance to cover the risk of damages payments related to defective products.

In the manufacturing sector, one in every three firms intends to take out such insurance, according to a recent survey of the Marine and Fire Insurance Association. The survey covered about 4,800 companies.

The product liability system makes it easier for consumers to claim payments of damages inflicted on them by defective products, leaving manufacturers more sensitive to the management of risks involving their products.

The product liability system is expected to create a fresh market worth 200 billion dollars for the nonlife insurance industry, an industry official said.

The State Corporation Commission determined today that liability insurance is “readily available for most consumers with prices relatively stable,” and that the market generally is competitive.

However, the commission expanded its list of potentially non-competitive insurance lines to include environmental damage, asbestos abatement by commercial contractors, public housing and a broad range of products.

Liability for environmental damage, especially for underground fuel storage tanks, headed the list of new SCC concerns this year. Those lines were named most frequently by consumers surveyed for their views on the availability and affordability of liability insurance.

The insurance industry, responding to both consumer confusion and disaffection, has opened a telephone Helpline to field all types of insurance questions and some complaints.

“We feel this is an example of industry desire to improve credibility with the American public. And we felt a need for an industrywide program. We want to be more responsive to consumer needs,” said Harvey Seymour, spokesman for the Insurance Information Institute, which represents property and casualty insurance companies.

The insurance industry endured a tough year in 1989, he said. California passed Proposition 103, which temporarily rolled back auto insurance rates. (The California Supreme Court since decreed that insurance companies have a right to make a reasonable profit.) Insurance was lashed in headlines ranging from “When an insurer fails,” in the New York Times in March to “Elderly urge Celeste to block increases in insurance rates” in The Plain Dealer in December.

And after shelling out $4 billion for Hurricane Hugo, the industry was hit with another $1 billion in claims from the San Francisco earthquake, Seymour said. Then Medicare catastrophic coverage was canceled and insurance companies were left scrambling again.

Increasing consumer concern and confusion were already being monitored by two insurance hot lines.

The insurance institute has operated one since 1981, “to make property-casualty insurance more understandable and offer unbiased information” said Seymour. Two years ago, the hot line received only 20,000 calls; last year, it logged about 70,000.

The Health Insurance Association of America maintained a hot line with the American Council of Life Insurance for 8 1/2 years; then went it alone after the council dropped out 1 1/2 years ago. The health insurance line has been fielding “lots of questions,” especially from older consumers, about such issues as Medicare supplemental insurance, long-term care insurance, and simply the meanings of words used in policies, said Melanie Marsh, hot line manager.

“A lot of our consumers are over 65 and may have been visited by three or four different agents trying to sell one type of policy. They call and tell us how nice the agents were, but that has nothing to do with the products being sold. They need lots of help to sort out the details,” said Marsh.

But callers often couldn’t distinguish one hot line from the other and many were frustrated when referred elsewhere, said Seymour. And the life insurance council was ready to renew hot line support.

“We felt an increasing need to provide assistance in a generic way, an increasing demand for attentiveness, in the last year,” said Henri Bersoux, spokesman for the life insurance council.

“The needs of the consumer are changing and the insurance industry is trying to adapt. Baby boomers are more concerned about loss of lifestyle than loss of life,” said Bersoux. And older policy owners are asking about cashing in insurance policies before death to avoid becoming penniless during catastrophic critical illness.

So on Jan. 1, the new insurance hot line was born to provide one-stop shopping for insurance information, and more comprehensive answers. In addition to the three major sponsors, a number of smaller insurance trade groups are supporting the hot line.

Free booklets covering answers to most-asked questions — and topics of great concern to insurers — will be sent, on request.

“And if we get a call from a consumer who is having an argument with an insurance company, we try to put the person in touch with a specific individual at the company,” said Seymour.

After Hurricane Hugo, the old insurance institute hot line quickly connected many people with their insurance company claim centers and “adjusters handled claims so promptly that many were hailed as local heros,” he said.

A sad revelation for many tenants after the hurricane, however, was that landlords do not insure tenants’ personal possessions, only buildings, he said. Tenant household insurance is vastly underused, even though it’s quite cheap, he said. While 95% of homeowners carry homeowners’ insurance, only 23% of tenants carry tenants’ insurance.

The rate of year-on-year insurance premium growth (222%) in the first half of 2009 exceeded the increase in consumer prices (210%), producers’ prices (145%) and GDP growth. Thus, the relation between the consolidated national insurance premium and GDP stood at 2.17%, compared to 1.5% in 2008, bringing Russia closer to the level of the most developed Western European countries, where the relation fluctuates between 2% and 3.5% of GDP.

This enabled Russia to fulfill one of the indicators laid out in a document on the development of the national insurance system in 2008-2010 early. The relation of insurance premiums to GDP is expected to stay at 2%-2.5% in 1999. Insurance, therefore, has made it as one of the most successfully developing industries in Russia.

A decline in the number of registered insurance companies and a reduction in actually functioning companies accompany the increase in the nominal amount of insurance operations. There are 1,724 working insurance companies in Russia, down by about 25%  from the beginning of 2008 to mid-2009. A total of 1,369 insurance companies provided information on first half results, 113 of these did not carry out insurance operations, making the total of functioning companies considered 1,247 or 73% of total registered companies.

Per capita insurance premiums remain extremely low. An increase from 124 rubles in the first half of 2008 to 275 rubles in the first half of 2009 cannot be considered significant enough to increase the level of insurance protection. Insurance premiums may have gone up to 2% of GDP, but that can be attributed to Russia’s relatively low GDP.

It is still early to start talking about the restoration of insurance premium and payment volumes in dollar terms. Insurance contributions totaled around $1.7 billion in the first half of the year, about 42% down on the same period in 2008. Insurance premiums per head dropped from $20 to around $12. Average half-year per head premiums top several thousand dollars in various developed countries and over $100 in East-European countries. Therefore, despite the relatively high rate of development in the insurance sector, the level of insurance protection for Russians remains low. INSURANCE COMPANIES SUCCESSFULLY COMPETE WITH OTHER FINANCIAL INSTITUTES FOR CLIENT FUNDS. The reasons behind production growth in export-oriented and import-substituting industries are clear, but the reasons behind growth in the insurance sector, which virtually does not export its services, are not so clear. Also, there are no nonresident insurance companies being forced out of the Russian market, as they are restricted from providing insurance services in Russia, apart from reinsurance. The volume of reinsurance services offered by nonresidents has probably even gone up in the first half of 2009, which has not only not hindered growth in the national insurance premium but is likely to have facilitated the process.

An explanation for the growth in insurance premiums lies in the analysis of their structure. Life insurance, which continues as in the last quarter of 2008 to account for the largest share of insurance premiums (39%), showed the biggest growth. The share of life insurance went up over 50% compared to the first half of 2008 and now exceeds the consolidated share of other voluntary insurance. Life insurance premiums probably increased less because people began to want to insure their lives or companies wanted to insure their employees and more because clients were interested in lowering tax and quasi-tax withdrawals from salary funds. Various points back up this theory, for example, the number of insurance agents through which classic life insurance policies were sold remained relatively unchanged. Also there were an extremely high level of life insurance payments (80%), just 10% under mandatory insurance and a seven-fold increase in life insurance loans, allocated by insurance companies to their clients. The share of personal insurance declined considerably probably due to the lower demand for voluntary medical insurance and accident insurance, that is, insurance which is most similar to life insurance. There was slower growth in private deposit account balances in commercial banks, whose salary payment services had been popular before the financial crisis.

Among the voluntary types of insurance, property insurance premiums also increased sharply. Center for Economic Analysis experts attribute the increase to the greater ruble insurance sums, as property costs and liability limits are usually fixed in dollar equivalent.

Mandatory insurance premiums went up 30%, due to slow growth in the national salary fund, the population’s high share of hidden revenue and the static minimum salary. Thus, the share of mandatory insurance in all types of insurance has virtually dropped to its 2004 level. LARGE INSURANCE GROUPS ARE BECOMING STRONGER ON THE INSURANCE MARKET. Russia’s market already has several dozen insurance groups responsible for the dominating share of assets and insurance transactions. Insurance groups usually come about through financial, industrial or financial-industrial groups, natural monopolies and regional administrations. However, there are at least two groups with ten-year histories. These were formed in a particular way.

The First National Bank of Zanesville recently gained approval from the Office of the Comptroller of the Currency to move into the financial planning, brokerage, insurance and annuities businesses, in a move to help expand its market presence.

The $1.2-billion-asset parent company, BancFirst Ohio Corp., recently acquired Chornyak and Associates Inc., a financial planning firm which also sells insurance but is not a full-service broker. It receives a commission, however, if customers purchase the mutual funds the planners recommend. The bank already has a trust company with insurance capabilities, but it was a small part of its business activities, mainly selling life insurance and annuities, according to chief financial officer Kim Taylor. Taylor said the trust subsidiary also offers some customers brokerage products.

"This provides a higher level of financial planning services to our customer base," he said, explaining the bank will provide the firm with its list of bank customers to solicit products, and brokers already in the bank’s branches will refer customers to the new affiliate.

Chornyak is located in Columbus, 50 miles from the Zanesville headquarters, and provides the added bonus of giving the bank additional presence in that market, where it currently has only one branch.

BancFirst acquired the financial planner by issuing 82,000 shares of stock, valued at around $2 million. The company is expected to bring in revenues in the $1.2 million-$1.6-million range.

Huntington National Bank recently received approval to get its foot in the door of title insurance sales in Ohio, anticipating a time when banks in that state will be able to own title insurance companies entirely. An accompanying lawsuit could have a significant impact on financial modernization legislation.

The Columbus-based company received approval from the Office of the Comptroller of the Currency April 8 to own a 10% stake in a local title insurance agency, Mound and Forth Title Agency, Ltd. In the application letter from the bank’s counsel to the OCC, the bank said the only reason it was applying for a minority stake is that it is prohibited from owning a majority interest in the company by state law. It added that it believes the state law is inconsistent with federal law and is "a prohibition or significant impairment on the powers of a national bank under the National Bank Act to own and operate a title insurance agency "

The bank, along with the Ohio Bankers Association, is suing the Ohio insurance commissioner in federal court to rectify that situation. Oral arguments are scheduled for this week.

Jeff Quayle, general counsel for the Ohio Bankers Association, said the state rule barring banks, Realtors, homebuilders and others from owning a title insurance company or a controlling interest in one "flies straight in the face of Barnett." Barnett refers to a Supreme Court decision which overturned an antiaffiliation law that severely limited banks’ ability to sell insurance to their customers. While bankers are fighting the rule in court, the Ohio Association of Realtors is working to overturn it with state legislation.

He added that the model Huntington is following of minority ownership has been done by other non-bank companies, such as homebuilders.

Industry watchers believe the case could have far-reaching effects on the banking and insurance industries because of its impact on financial modernization legislation.

"If this goes through before H.R. 10 passes, then clearly national banks can sell title insurance and it would be much harder for them to hold the provision in the House version of H.R. 10 that prohibits the sale of title insurance," said Buzz Gorman, legislative counsel for the Conference of State Bank Supervisors.

So devoted to the ideal of customer service are bankers at Synovus Financial Corp. that some will work nights and weekends. That extra touch they believe will set them apart from competitors was highlighted when a customer called the head of private banking–a program only a year and a half old–on a Sunday night. He announced he was leaving the country for a trip in the morning and would need a passport. The banker opened up the customer’s safe deposit box and produced the needed document.

"The products we deliver are all pretty much the same, but where we’re going to beat the competition is we’re going to deliver them however and wherever the customer needs it. We have better relationships because we extend ourselves," said Walter M. "Sonny" Deriso, Jr., vice chairman of the board of Columbus, Ga.-based Synovus, and the executive in charge of the company’s "New Bank" effort.

The New Bank program means moving toward modernization of the company, which translates into delivery of products and services in ways that customers want, Deriso said.

The bank is stepping up catering not just to the wealthy–with the private banking program it’s rolling out to 10 more of its subsidiary banks from the pilot site–but to the ordinary customer’s needs. It recently completed a 14-month conversion to M&I’s data warehousing capabilities and can do more sophisticated target marketing.

The $10.5-billion-asset holding company, which maintains independent boards and charters at each of its banks, is gearing up to complete another chapter in its New Bank effort. By adding insurance bank-wide, and brokerage and financial planning services for all customers, the southeastern bank company hopes to round out its offerings and achieve what is becoming the holy grail for banks: to be the place where customers get all their financial products.

The three-phased introduction of the insurance subsidiary has begun at flagship Georgia-state chartered Columbus Bank &Trust (CB&T) and two other banks in Alabama and South Carolina. The final state in Synovus’s market, Florida, has somewhat simpler insurance regulations, and will be added after the pilot periods in the other three states.

After examining a study of other banks’ methods of offering insurance prepared by KPMG Peat Marwick, which showed most are not profitable yet, and speaking with its own bank managers, Synovus management decided not to acquire an insurance agency. It will instead offer insurance to its customers through a partnership with a third party, which has been chosen but will not be announced until June, Deriso said. The carrier will provide backroom operations, a call center and licensed agents who can work as consultants or specialist to customers with sophisticated needs, Deriso said. The bank plans to get customers to the insurance agents, who must be located in a separate area of the bank, by referrals from tellers and customer service representatives, and targeted marketing.

The first phase of the three-phase roll-out includes the simplest products for novice salespeople to understand: credit life and accident insurance which most banks have offered for years, and fixed annuities, which Synovus has offered for about a year. In addition, it will offer title insurance, through a partnership with a local firm, and worksite-related supplemental insurance for commercial customers with specialist AFLAC.

The bank is also creating a reinsurance captive for mortgage insurance. In that line of business the bank will deal with several carriers, the split depending on the amount of work done by the bank or the carrier. Because reinsurance is still a fairly new line of business for banks, Deriso said special approval would be needed from regulators. He added that he had discussed the bank’s plans with regulators in all four states as well as with the Office of the Comptroller of the Currency, and all were comfortable with the bank’s plans and indicated there should be no snags in obtaining approval.

The second phase, to begin in the fourth quarter, will offer homeowners and auto insurance. The third phase, to start late in the year 2000, will offer life, disability, long-term care and group disability insurance.

Deriso said in addition to having some employees trained to sell insurance, the plan is to have some of these specialists licensed to sell securities and be able to do financial planning for all customers. Currently, the banks can offer some customers a limited version of that service. Some of the specialists on the asset-management side of the bank can act as gatekeepers and refer some of the trust clients to the brokers. Whenever an annuity is sold, that customer has a financial profile done, a sort of minifinancial plan. But CB&T will begin piloting in May the use of what Deriso calls "superpeople," employees licensed to sell insurance and all brokerage products.

Another new program which Deriso said ties several of the bank’s financial services together, an asset management account, also requires specialist employees to sell it. In the pilot stage now and set to be rolled out in the second or third quarter, the wealthy-customer’s account has a brokerage feature and allows funds to be swept into an FDIC-insured account. The specifics of minimum account balance–probably around $10,000–and working with the data processor to clear all trades, are being worked out now.

Deriso is in the thinking stage now of the latest piece of the plan to offer customers as broad an array of financial services as possible: additional money management. He is grappling with whether to hire more money managers to complement the team that runs the company’s fixed income and equity funds, ranked by PIPER in the nation’s top ten, or to form an alliance to continue to get value from the $7 billion under management with an outside firm

The insurance underwriting industry won a sweeping victory when a panel of the 11th U.S. Circuit Court of Appeals, based in Atlanta, said insurance regulators have the sole authority to determine whether a hybrid bank or insurance product is banking or insurance.

Banking lawyers cautioned that the ruling conflicts with other recent court decisions, including two by the Supreme Court. Efforts to contact the Washington offices of American Deposit Corp., which has a pending patent on the product, were unsuccessful. It would be the only entity able to appeal the decision to the Supreme Court. Michael Crotty, deputy general counsel for litigation for the American Bankers Association, reacted to the decision by saying, "These guys just missed it. It is flat wrong.

"It flies in the face of several recent unanimous Supreme Court decisions, including Barnett, decided in 1996, and Valic II, which was handed down in 1995," he said. It also is contradicted by Valic I, handed down in 1959, which says annuities are securities and not insurance, Crotty said.

The court held that the National Bank Act is a minor law and is "trumped" by the McCarran-Ferguson Act when an analysis is made whether a product is banking or insurance. The case deals with a Montana bank’s effort to sell a fixed annuity as a bank product. The product, called a "Retirement CD," was advertised as providing tax-deferred treatment on earnings inside a bank’s federally-insured certificate of deposit. Upon maturity, the accumulated value of the product would be distributed to the owner in periodic payments, like an annuity.

"The Retirement CD was an annuity, an insurance product," said Gary Hughes, vice president and general counsel of the American Council of Life Insurance. "Equally important, the court noted that the Office of the Comptroller of the Currency overstepped his authority in 1994 by giving the product the green light. What this shows is that Congress, not the OCC, will decide whether banks or their affiliates will be allowed in the future to underwrite annuities and other insurance products," he added.

With his eye on pending legislation that would bar banks from underwriting annuities in operating subsidiaries, Hughes added, "If any banker had considered sidestepping Congress and underwriting annuities in a bank’s operating subsidiary, this should significantly dampen those plans."

But David Roderer, a banking lawyer in Washington, called the decision "backward-looking, static and simplistic." He explained that the court looked at the issue as if there were no hybrid products, only banking, insurance and securities products. He added that the National Bank Act, and the Supreme Court’s interpretation of that law "clearly indicate that the agency has the authority to adjust banking products to the times."

A federal court decision that limits national bank sales of insurance outside of small towns to credit-related products is "troublesome," but could set the stage for the reversal of two long-standing appeals court decisions contrary to existing precedent that the industry has wanted to attack for some time, sources said.

The decision Judge June Green handed down March 23 says national bank insurance sales are limited to small towns unless they are credit-related, and also says the Comptroller of the Currency exceeded its authority in declaring crop insurance a "credit-related" product.

Staffers at the OCC said the agency would appeal the ruling.

The decision was based on two precedents, set in 1968 and 1989. The courts held that Sec. 92 of the National Bank Act, which says that, "in addition to all other powers" banks are allowed to sell all types of insurance from offices in places of 5,000 or fewer, is an implied bar on national bank insurance sales outside of small towns.

Acting Comptroller Julie Williams had based her interpretation allowing Iowa national banks to sell crop insurance on another provision of the National Bank Act, Sec. 24(7th), the incidental powers clause. In approving the Iowa banks’ application, Williams had ruled that sale of such insurance is part of, or incidental, to the business of banking. But, in her decision, Green said that ruling "appears limited to a certain type of insurance known as ‘credit life’ and does not purport to stand for the notion that Sec. 24 (7th) can be used to authorize the sale of all insurance by national banks everywhere." But, she said, "crop insurance protects the farmer, not the lender, and is therefore not credit-related."

But David Roderer, a Washington banking lawyer, calls the decision "troublesome," and contrary to the Supreme Court’s 1995 ruling that the Comptroller has the authority under the incidental powers clause to reinterpret the National Bank Act to fit changing market conditions affecting national banks.

While troublesome, Roderer said, the Green decision allows banks and the Comptroller an opportunity to have appeals courts revisit the two older decisions, which the banking industry universally believes are contrary to the 1995 precedent.

In another sign of the converging financial services industry, a New Yorkbased life insurance company has won approval to provide trust services to its customers nationwide through a unitary thrift.

However, a banking industry lawyer said that in approving the application by Guardian Life Insurance Co., the Office of Thrift Supervision (OTS) has imposed new, "intrusive" restrictions on non-banks using unitary thrift charters to conduct parts of their financial services businesses. Institutions planning to apply for this type of thrift charter should be aware that the agency is now imposing new restrictions between broker/dealers and trust companies operated out of thrifts.

In its application, Guardian Life said a number of insurance, securities and investment companies, which operate mutual funds, are finding that the thrift charter is the ideal vehicle to provide nationwide trust services to customers. The new institution will be known as Guardian Trust Co. FSB, and will employ eight to 10 trust professionals.

The president of the newly-chartered institution, Francis Quinn, said Guardian, a $26-billion-asset life insurance and reinsurance firm, will likely launch its new service in June, after meeting several preconditions imposed by the OTS when it approved the new charter March 26.

Guardian will use its new unitary thrift to provide such nationwide services as trusts and individual retirement accounts through Guardian’s existing 5,000 employees and 3,000 agents, Quinn said. Most agents work through general insurance agencies; Guardian, a mutual institution, and its officials have said that it plans to remain one.

Guardian will feature multiple money managers, tax-sensitive investing and superior reporting capabilities to its trust customers, Quinn said. "Our options include separate account management, directed portfolios and mutual fund asset allocation services," he said. "We will not offer annuities as a product of the trust company. But, if an annuity is in the portfolio, we can manage it at the trust company.

"We see our role as providing sophisticated services our field associates can offer to their clients," Quinn said. "We don’t see ourselves as competing with the banks. There is a whole industry of nontraditional providers of trust services," he said. They are affiliated with securities firms, insurance companies and investment management firms, which include mutual funds companies.

However, a lawyer in Washington said the OTS’s approval "is unusually intrusive both as to what has to be done immediately and what must be done going forward, particularly as to the relationship between the trust and the securities dealing activities of Guardian."

The lawyer said the approval "imposes certain restrictions and arrangements we haven’t seen in the past. That seems to suggest that the agency is still grappling with issues as to the level of regulation that is appropriate and the level of freedom that should be enjoyed by trust operations in a diversified financial institution structure."

He said that one of the provisions that concerns him is language designed to "ensure that neither the broker nor the holding company dominates the federal savings bank to the extent that one is treated as a mere department of the other." The agency is clearly "seeking to ensure that there is adequate corporate independence so that the thrift is not just a department of the insurance company operations." The agency appears especially concerned with the independence of the thrift from Guardian’s securities brokerage unit, Guardian Investors Services, a registered broker/dealer.

Certain disclosures regarding trust operations, particularly in conjunction with securities brokerage, that must be made by Guardian Trust are new, the lawyer said.

But Quinn said Guardian is "comfortable with the terms of the order the OTS has issued. We were able to meet all the requirements that we understood were presented to us."